Many Forex traders dislike filling in their evaluation sheets after the trading day is completed. Here are probably the 3 main reasons why:
For most traders completing evaluations is not the most exciting task on the planet;
The task becomes especially annoying when losses have occurred;
Reviewing losses also confronts us with our own mistakes, which is simply unpleasant for our state of mind.
Most Forex traders know that evaluations are ‘supposedly’ important, but still do not take the time and energy to seriously complete their sheets. The best and greatest traders are like professional sportsmen, they learn from every kick, pitch, and throw. Here is why evaluations are the real path to improvement:
Traders can recognize if they made a mistake in implementation of the trading plan and can evaluate the real performance of a strategy once their own implementation mistakes are removed;
Traders can group together mistakes and try to understand what circumstances, behavior, and situations are at the root of the issue;
Traders can assess the performance of multiple strategies, and evaluate various statistics, draw down levels, equity curves, etc;
Traders can implement improvements and monitor these.
Forex traders can make great progress forward when they start to deal with evaluations as seriously as they take entering a trade. Each trade offers a ton of information and learning potential: go out there and capitalize on it!
PRACTICAL TIPS FOR EVALUATIONS
Here are some practical tips that could help improve the consistency with filling in the evaluation sheet:
Keep a scorecard keeping track if you filled in the sheet or not;
Have a target (95% for instance) for filling in the scorecard for the month and year and update target as your progress;
Provide yourself with a bonus if the target is reached;
Give yourself a warning if the target is missed (you are your own boss!);
Mark trades as correct, inaccurate, mistake or blunder, depending on your assessment;
Have a target for each of the groups and update targets as you progress;
Have a weekly review (Friday’s and Saturday’s are best) of the trades and identify learning points for the future;
For trading the new week go through the weekly learning points and the trading plan;
Review learning points at the end of each month on a day you do not trade (like NFP);
Make sure the strategy and psychology are in sync;
Change the mental mind set: celebrate and embrace losses as much as the winners;
Change the mental mind set: view losing and failed trades as an OPPORTUNITY to learn and improve;
Change the mental mind set: do NOT see losing trades as a failure;
Start implementing NOW and do not postpone action. Postponement ultimately leads to never.
APPLYING DEFENSE FIRST
Ultimately the evaluations should slowly but surely lead to better results. The process will not be an overnight miracle. Many Forex traders think that trading is about making one big win or making one perfect decision that leads to profits. Wrong!
The real goal is incremental & sustainable improvements. This is of course assuming that basic foundation for trading is solid. Traders must have an iron defense first of all:
Entry checklist (TOFTEM);
SMALL STEPS LEAD TO BIG ADVANTAGES
Consistency is the next step, followed by finding and specializing in your edge, whether that lies in your ability to automate testing, identify discretionary high probability setups or using the Strike trader strategy.
Consistency and specialization are not elements that can be hurried. Developing these will take time and the learning process should be constant.
A trader can compare this process with a chess game. In chess, many victories are achieved due to one player gaining a positional edge over their opponent. This positional edge is not miraculously created in one move (unless the opponent makes a blunder or mistake), but by making a small improvement or better decision each step of the way.Eventually this creates an ever-increasing edge and at one point a crack in the defense of the opponent is found OR the opponent makes a mistake due to the mounting pressure. The same can be said for trading.
Small gradual improvements lead to a big advantage if applied consistently at each decision point (and we do not make a mistake or blunder along the way that removes our built up advantage).
CONCLUSION: THE PATH FORWARD
Ultimately Forex traders can only improve if they take time to evaluate and actively implement the improvement points. It boils down to:
Testing – making a trading plan - implementing the trading plan – reviewing trades and statistics – evaluating, analyzing and learning from trades and streaks – finding improvements – testing improvements – decision whether to keep strategy or not
Traders must limit inaccuracies, needless mistakes and costly blunders by having a solid defense of management (risk, money), psychology (patience, discipline), and planning (entry, exit). Once we have this setup, we need to focus on consistency and capitalizing on our strengths and edge. The latter is a gradual progress and emphasis should be on small increment of gains, not home runs. Traders need to put themselves in a positional advantage, not hope for the lucky win.
Defense limits the downside risk, the errors and mistakes. Consistency and our edge (offense) allow us to grow and improve our results.
It would really mean a lot to me if you could share this post with others. We would like to get feedback from as many readers as possible on this topic. Thank you in advance!
What do you think of the practical tips for making the evaluations?
Are there any tips or tricks that you would like to share that helps you with keeping consistent in filling in the evaluation forms?
Do you agree that defense limits the downside risk of errors and offense offers opportunities to put a trader in positional long-term advantage?